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Board Named to Review Grants for Nonprofit Health Care Co-ops

By John Reichard, CQ HealthBeat Editor

June 28, 2010 -- If they build a board, will the co-ops come?

"Consumer-operated and oriented plans" were the hot topic at one point of last summer's health overhaul debate—promoted by moderate Democrats such as Sen. Kent Conrad of North Dakota as a less divisive alternative to for-profit care than the "public plan" strongly opposed by hospitals and insurers.

But while the co-op idea may have won grudging acceptance as a compromise, marketplace analysts wondered whether new co-ops would actually form.

Skepticism aside, that process has now begun, with the June 23 hiring of an advisory board filled with old hands in the insurance marketplace. Those hired are no strangers to trying to spur the availability of better-organized, more-affordable care—a key goal of the co-op language.

Under the health care overhaul law, the department of Health and Human Services will have $6 billion to hand out in grants and start-up loans to foster the creation of at least one consumer-oriented nonprofit health plan in each state. If revenues of the plans exceed their expenses, the surplus must go to lower premiums, improve benefits or improve quality.

The money must be given out by July 1, 2013. Loans can be issued to help pay start-up costs and grants can be provided to help meet solvency requirements for health plans. The new board will advise HHS on the issuance of the loans and grants.

The idea is to create consumer-run plans, a type of plan that largely does not exist now in most parts of the country. Board members must not have a "significant interest" in the insurance industry, the Government Accountability Office said in announcing the appointments.

Among the 15 people named are two veterans of the California Public Employees' Retirement System (CalPERS), long regarded as one of the country's more innovative health care purchasers: Margaret Stanley has served as health benefits administrator at CalPERS, and Allen Feezor was assistant executive officer for health benefits at CalPERS.

Now retired, Stanley also has served as executive director of the Puget Sound Health Alliance in Seattle, a coalition of employers, hospitals, doctors and insurers that seeks to re-engineer care in line with treatment practices proven to be effective. Feezor most recently served as deputy secretary of the North Carolina Department of Health and Human Services and oversees health care overhaul efforts in the state.

Also named to the board is Rick Curtis, president of the Institute for Health Policy Solutions in Washington and a veteran of many state-based efforts to sharpen competition among insurers based on price and better-coordinated care.

Another pick on the purchasing side brings a somewhat more political flavor to the lineup: Terry Gardiner, a commercial fisherman in Alaska, is the national policy director of Small Business Majority, a small business group that often finds itself on the opposite side of the health care debate as the GOP-oriented National Federation of Independent Business.

Various members are involved in the delivery of care: James Brosseau directs the Altru Diabetes Center in Grand Forks, N.D., and specializes in improving coordination of care to treat diabetes and other chronic diseases; Herbert C. Buchanan is the chief operating officer of the University of Maryland Medical Center; David D. Buck, a professor of family medicine at Baylor College of Medicine, is the founder and president of Healthcare for the Homeless in Houston; family physician David A. Carlyle is co-medical director of the Homeward Hospice in Ames, Iowa.

Michael Pramenko is the president-elect of the Colorado Medical Society.

Other appointees have a consumer focus or are veterans of the efforts to form cooperatives. Patricia K. Haugen is South Dakota coordinator for the National Breast Cancer Coalition in Sioux Falls. William Oemichen is the chief executive officer of Cooperative Network, an association representing 600 cooperatives in Minnesota and Wisconsin involved in agriculture, health care and financial services. Tim Size is the executive director of the Rural Wisconsin Health Cooperative in Sauk City.

Academics and consultants round out the list. Barbara Yondorf is a health policy consultant in Colorado who is on the board of directors of the Colorado Consumer Health Initiative in Denver. Donna C. Novak is an actuary and heads a consulting firm in Sahuarita, Ariz., which specializes in reducing health care costs and assessing the financial health of insurers. And Jon B. Christianson chairs the health policy department at the University of Minnesota School of Public Health and conducts research on health care regulation and finance.

A board is one thing, but the process of lining up doctors, hospitals and other providers to participate in the plan's networks is quite another. Plans also must be able to market effectively and negotiate favorable terms with suppliers of products and services. In a market where the size of a plan often dictates its ability to control costs, co-ops might have a tough time going up against market-savvy insurers.

"There's some very smart people on the co-op advisory board, and it will be interesting to see what they come up with," said Alwyn Cassil, public affairs director for the Center for Studying Health System Change, a Washington research organization.

"But even with $6 billion in government seed money, the barriers to entry in the health insurance market are high, and creating consumer-run, nonprofit insurers from scratch will be difficult," Cassil noted. Running "what amounts to an insurance company isn't as simple as some people would like to believe. It's possible that co-ops could gain traction in some parts of the country on a small scale, but it's hard to see how they would be able to compete successfully against established players like [Blue Cross-Blue Shield plans] in the individual and small-group markets."

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